SEGMENT REPORTING- AS17

CA. PANKAJ AGRWAL

B.COM(Hons) LL.B. FCA

Objective
To enable the users of financial statements to:

Better understand the performance of the enterprise; Better assess the risks and returns of the enterprise;and Make more informed judgments about the enterprise as a whole.

Applicability of standard

Listed Companies Companies in the process of listing their equity or debt securities Banks including Co-operative banks Financial Institutions Insurance companies

Applicability of standard

All commercial and business reporting enterprises having turnover exceeding Rs. 50 Crores. All commercial and business reporting enterprises having borrowings including public deposits in excess of Rs. 10 Crore at any time during the accounting period. Holding and subsidiary companies of above.

Definitions
Business Segment is a component of an enterprise

distinguishable

that is engaged in providing an individual product or service or a group of related products or services and that is subject to risks and returns that are different from those of other business segments.

Factors for consideration of business segment

Nature of products or services Nature of product processes Type or class of customers for the product or services Methods used to distribute the products or provide the services The nature of regulatory environment, for example, banking, insurance or public utilities.

Geographical Segment - Definition

Geographical segment is a distinguishable component of an enterprise:

that is engaged in providing products or services within a particular economic environment; and that is subject to risks and returns that are different from those of components operating in other economic environments.

Factors for determination of geographical segment

Similarity of economic and political conditions; Relationships between operations in different geographical areas; Proximity of operations; Special risks associated with operations in a particular area Exchange control regulations The underlying currency risks.

Segment Reporting-formats

Segment reporting is to be made as

Primary Segment Reporting Secondary Segment Reporting

Dominant source and nature of risks and returns will govern whether the business segment or the geographical segment will be reported as primary segment reporting format.

Reportable segment
A business or geographical segment is a reportable segment only if: Its revenue from sales to external customers and from transactions with other segments is 10% or more of the total revenue, external and internal, of all segments; or Its segment result whether profit or loss is 10% or more of The combined result of all segments in profit; or The combined result of all segments in loss, Whichever is greater in absolute amount; or

Reportable segment
segment assets are 10% or more of the total assets of all segments. Any segment may be treated as reportable segment by the management. If not designated as a reportable segment, it should be included as an unallocated reconciling item.
its

Segment Revenue
Segment revenue is the aggregate of (i) the portion of enterprise revenue that is directly attributable to a segment. (ii) the relevant portion of enterprise revenue that can be allocated on a reasonable basis to a segment, and (iii) revenue from transactions with other segments of the enterprise.

Exclusions from Segment revenue

(a) (b)

(c)

Extraordinary items. Interest or dividend income, including interest earned on advances or loans to other segments unless the operations of the segment are primarily of a financial nature;and Gains on sales of investments or on extinguishment of debt unless the operations of the segment are primarily of a financial nature.

Segment Expenses
Segment expense is the aggregate of (a) the expense resulting from the operating activities of a segment that is directly attributable to the segment, and (b) the relevant portion of enterprise expense that can be allocated on a reasonable basis to the segment including expense relating to transactions with other segments of the enterprise.

Segment Expense- Exclusions

Extraordinary items Interest expense including interest incurred on advances or loans from other segments, unless the operations of the segment are primarily of a financial nature; Losses on sales of investments or losses on extinguishment of debt unless the operations of the segment are primarily or a financial nature;

Segment Expense- Exclusions

Income-tax expense General administrative expenses, head-office expenses, and other expenses that arise at the enterprise level and relate to the enterprise as a whole.

Segment Assets

Segment assets are those operating assets that are employed by a segment in its operating activities and that either are directly attributable to the segment or can be allocated to the segment on a reasonable basis. If the segment result includes interest or dividend income, its segment assets should also include the related receivables, loans, investments, or other interest or dividend generating assets.

Segment Liabilities

Segment liabilities are those operating liabilities that result from the operating activities of a segment and that either are directly attributable to the segment or can be allocated to the segment on a reasonable basis. If the segment result of a segment includes interest expense, its segment liabilities include the related interest bearing liabilities.

Segment Liabilities
It does not include income-tax liabilities.

Primary Reporting Format

1.

2.

3.
4.

Segment Revenue classified into From sales to external customers;and Segment revenue from transactions with other segments. Segment result i.e. Segment revenue less segment expense. Total carrying amount of segment assets; Total amount of segment liabilities;

Primary Reporting Format

5.

6.

Total cost incurred during the period to acquire segment assets that are expected to be used during more than one period. Total amount of expense included in segment result for depreciation and amortisation in respect of segment assets for the period.

Primary Reporting Format

7.

Total amount of significant non-cash expenses, other than depreciation and amortisation in respect of segment assets, that were included in segment expense. Information at 6 and 7 not to be given if segment cash flow statement is prepared.

Reconciliation Statement

A reconciliation between information for reportable segment and aggregated information in enterprise financial statements is required to be presented.

Secondary Reporting Format

If the primary format is Business Segment: Segment Revenue from External Customers based on Customer location for each geographical segment Total carrying amount of segment assets by geographical location of assets.

Secondary Reporting Format

The total cost incurred during the year to acquire segment assets that are expected to be used during more than one period.

Secondary Reporting Format

If the primary format is geographical segment, the following information for each business segment: segment revenue from external customers; the total carrying amount of segment assets; and total cost incurred during the year to acquire the segment assets.

Other Requirements:
If primary format is geographical segment based on location of assets and the location of its customers is different, Revenue from external customers for each geographical segment is also required to be reported.

Other Requirements
Similarly, if the geographical segment is based on location of customers and the location of assets is different, the following information need to be reported: total carrying amount of segment assets by geographical location. total cost incurred during the period to acquire segment assets.

Other disclosures

Inter-se Transfers Changes in accounting policies Types of products and services included in each reported business segments Composition of each geographical segment, if not otherwise disclosed in the financial statements.

From Published Accounts

Single Segment

Accounting Standards Interpretation (ASI) 20 dated 14th February 2004, issued by the Accounting Standard Board of the Institute of Chartered Accountants of India, on AS 17, Segment Reporting clarifies that in case, by applying the definitions of business segment and geographical segment given in AS 17, it is concluded that there is neither more than one business segment nor more than one geographical segment, segment information as per AS 17 is not required to be disclosed.
Adani Exports Ltd.

From Published Accounts